Investment Info:

4400 square foot cabin on Lake Superior overlooking the western Apostle Islands 

Purchase price: $325,000
Cash invested: $60,000

Post-Renovation Appraisal: $495,000
Post-Renovation LOC: $154,500

My wife and I had frequented this area since we were kids. We wanted to begin adding a few STR's to our LTR portfolio. This oversized cabin was exactly what we were looking for. There were no large cabins in the area and the rental demand for the area was excellent in this remote part of WI.

What made you interested in investing in this type of deal?

We had been frequenting the area and thought it was a niche market to have a house that could sleep 18 people comfortably.

How did you find this deal and how did you negotiate it?

It was listed on the MLS, but had started out way too high and had been listed on and off for the previous 10 years. It was originally listed for 500k and eventually was at 340k; we settled at 325k.

How did you finance this deal?

10% down 2nd home program, with the intention of renovating it immediately and be rid of PMI.

How did you add value to the deal?

It was not a complete gut, but I had about 30k worth of renovations into it which I did mostly myself and some help from friends/family. There was a rough-in for an additional tub and it was incorrectly listed as only a 3 bedroom, when it was really a 4. I framed in an additional shower, replaced 4000 square feet of flooring with LVP to hold up to rigors of STR, removed 50 gallon electric water heater and replaced with a 75 gallon LP unit, completely renovated both sets of stairs, added additional railings to bring up to code, new trim throughout the house, added automation with thermostats and locks, and also furnished it via secondhand stores with some new items.

What was the outcome?

The original broker's opinion to drop PMI came in at 458k, I decided to order a full appraisal for a LOC. The full appraisal came in at 495k, which allowed me to open up a 154k LOC against the property. I currently have the next 6 weeks booked up for an average of 220$/night; and have about 1/2 of my peak season booked up averaging 500$/night. It should conservatively cash flow 1500$/month. I've had 6 guests stay so far and have given 5* reviews, I'm still working on automation with cleaners and schedule's, but it's getting there.

I decided to not completely refinance as I would rather have access to the LOC and didn't want to go through the nightmare of underwriting again as it is a pain for conventional financing with my long term rental portfolio and I have cheap (3%; 30 year locked) debt on this property already.

Lessons learned? Challenges?

Logistics can be a nightmare when you are in a rural area.  I pay more than most for handymen, cleaners, electricity etc... but the payoff can be massive.  

I still need to get a professional photographer in the building as my AirBnB and VRBO pictures are less than ideal, but schedule's haven't worked well with adequate sun and not having people in the cabin.  I included a link to the completed project.  

Lake Superior Lakefront and Large Group Getaway (dog-friendly) - Herbster (vrbo.com)